How do I back up the content on my iPod Touch 3G onto my computer?

I have an iPod Touch 3G with OS 3.1.3. which I bought in the summer of 2010. I can't use a lot of apps because of the out of date operating system. An Apple associate told me yesterday I could update the OS on it by connecting the USB cable to my computer and following the directions in my manual. I tried to find a manual on line and the oldest one I could find says that I can use iTunes to update or restore my software. How? I can't find a way to do it.

It also warns that "in some cases, an update may also involve restoring iPod Touch, and that would delete all stored data! However, it says if you've backed up iPod Touch with iTunes on your computer, you can restore data from the backup at the end of the restore process.

I can't find how to back up my data from my iPod Touch onto my computer either.

Also, it makes me nervous about the assurance that the deleted data could then be restored at the end of the restore process.

My iPod Touch is for work and I REALLY need the data that is on it and can't afford to risk losing it.

Would much appreciate some help with this. Thanks!